The International Monetary Fund (IMF) recently released its World Economic Outlook report, which provides a mix of good and concerning news about the global economy.

Good News:

1. No Global Recession: A major global recession, which many feared, has been avoided.
2. Inflation Almost Under Control: The fight against rising prices (inflation) is almost won. Prices are stabilizing, which means the cost of living is not increasing as fast as before.
3. Steady Growth: The global economy is growing at a steady pace. The United States, in particular, is expected to grow faster this year than earlier predictions.

Concerning News:

1. Challenges in Some Regions: Some parts of the world, such as West Asia, sub-Saharan Africa, and Central Asia, are facing problems. Conflicts and unrest are making it hard for these regions to produce goods and ship them. As a result, their growth is expected to be lower.
2. Better Prospects in Asia: On the other hand, countries in Asia, especially China and India, are doing better. This is largely due to higher investments in public projects (like infrastructure). This helps balance out the negative effects seen in other regions.

Global Growth Predictions:

The IMF expects the world economy to grow by 3.2% in 2024, which is the same as in 2023. This stable growth is partly because the world is recovering from the shocks caused by the COVID-19 pandemic and the war in Ukraine. Tight monetary policies (where central banks control the money supply and interest rates) have also helped in reducing inflation. As inflation gets closer to the targets set by central banks, there may be more space to change policies in ways that support economic activity, like making it easier to borrow money or invest.

Concerns About Inflation:

While inflation is slowing down overall, the IMF warns that food prices could rise again in some developing countries. Also, the cost of services (things like transportation, healthcare, and education) is still much higher than before the pandemic, almost double the previous levels.

India’s Economic Outlook:

For India, the IMF has kept its prediction for GDP growth at 7% for the year 2024-25. After that, growth is expected to slow slightly to 6.5% in the following year. This slowdown is because people have already spent much of the money they saved during the pandemic, which means less “pent-up demand.” Some signs of this slowing demand can be seen in the sale of cars and consumer goods, particularly in cities.

India’s growth was 6.8% in the second quarter of the year, compared to 6.7% in the first quarter. The monsoon season has been good, and rural incomes have improved, which could help boost the economy in the coming months. However, the IMF also warned that we shouldn’t rely on these factors too much.

Future Challenges:

The IMF’s long-term outlook is more worrying. It predicts that global economic growth will only reach 3.1% in the next five years, which is much lower than what we saw before the COVID-19 pandemic. This slower growth is partly due to more countries adopting protectionist policies, where they focus on protecting their own industries and trade, rather than promoting global cooperation.

India’s Economic Reforms:

India’s economy depends a lot on domestic factors, but weaker exports and lower investment flows from other countries will create challenges. Recently, the Indian government emphasized that most economic reforms need to happen at the state level. However, the IMF suggests that the central government should also take strong actions to boost growth. This includes making India more open to trade by lowering tariffs (taxes on imported goods) and making it easier for foreign companies to invest in the country. The IMF also recommends that India focus on improving competition between businesses, better economic integration across the country, and encouraging private investments to spur long-term growth.

In summary, the global economy is stable for now, with some regions doing better than others. India’s economy is growing but faces challenges in the future. Both state and central governments need to focus on reforms to ensure sustained growth.

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West Versus the Rest. Accusations Againts India. The Hindu Editorial Explanation 23 October 2024.